Posted by: koherston | February 20, 2014

Dispute Over Property Classification and Equitable Division in Memphis Divorce: Luttrell v. Luttrell

Facts: Prior to the beginning of this 25 year marriage, Wife’s grandparents made her the beneficiary of a substantial trust fund. Throughout the marriage, Wife kept the trust assets in investment accounts titled solely in her name. Because of Wife’s considerable wealth, Wife was able to be a stay-at-home mother while Husband worked.

At various times during the marriage, Wife used money from her investment accounts to make down payments on real estate purchases that were titled to both parties.

After several days of trial, the trial court ruled that Wife’s trust assets were her separate property. Regarding the marital assets, the trial court divided those 75% to Husband and 25% to Wife.

Both parties appealed.

On Appeal: The Court of Appeals affirmed the trial court.

Property Classification. Husband argued the trust assets became marital property under the doctrines of transmutation and commingling.

In divorce proceedings, Tennessee courts have the authority to divide the marital property of the parties, but not each individual’s separate property. Thus, the trial court’s first task is to determine whether property is marital property or separate property. The court must give each party their separate property, then divide the marital property equitably.

Marital property” includes all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing. “Marital property” includes income from, and any increase in value during the marriage of, property determined to be separate property if each party substantially contributed to its preservation and appreciation.

Separate property” includes all real and personal property owned by a spouse before marriage, income from and appreciation of property owned by a spouse before marriage, and property acquired by a spouse at any time by gift or inheritance.

Separate property may become marital property through commingling of funds or the doctrine of transmutation. Separate property becomes marital property by commingling if inextricably mingled with marital property or with the separate property of the other spouse. If the separate property continues to be segregated or can be traced into its product, commingling does not occur. Transmutation occurs when separate property is treated in such a way as to give evidence of an intention that it become marital property.

After reviewing the record, the Court rejected Husband’s argument, reasoning:

Despite Husband’s contentions, we conclude that the record shows that Wife never intended to relinquish control over the Trust’s investment accounts. [The account administrator and trust officer for the accounts since before the marriage] stated in his deposition that whenever Husband called about transferring funds from the investment accounts, he asked whether Wife approved of the transfer. [The trust officer] testified that he would never transfer funds at the direction of Husband without Wife’s approval. Though Husband participated in discussions regarding investment of the Trust’s funds, [the trust officer] stated that he never acted on Husband’s investment advice. Throughout the marriage, the investment accounts were always titled solely in Wife’s name or the name of the Trust, even after the funds were transferred between banks. Perhaps most tellingly, Husband borrowed $20,000 from his mother in 2010 to purchase inventory for the antiques store. At that time, the current divorce proceedings had not begun. If Husband had unfettered access to the investment accounts, as he claims, such a loan would have been unnecessary.

Thus, the trial court’s classification of the trust assets as Wife’s separate property was affirmed.

Equitable Division. Wife argued the trial court failed to award her an equitable share of the marital assets.

The trial court valued the marital estate at $800,000. Of that amount, Husband was awarded $600,000, or 75%, and Wife was awarded $200,000, or 25%.

In a marriage of this duration, Tennessee law presumes that an equitable division is an equal division of the marital estate. That presumption can be rebutted, however.

After reviewing the record, the Court commented:

Though many of the factors indicate the Wife’s substantial contributions to the marriage justify a larger award of the marital assets, the trial court clearly weighed the parties’ substantial disparity in separate property heavily. Wife’s separate property, valued by the trial court in excess of $1,772,339, dwarfs the total value of the parties’ marital property. Additionally, the trial court found that Husband did not have any separate property. Though the value of the parties’ separate property was just one factor the trial court considered in making its decision, it cannot be denied that, in this particular case, it was especially significant. In light of the foregoing, the division of approximately seventy-five percent of the marital estate to Husband and twenty-five percent to Wife was within the trial court’s wide discretion. We therefore affirm the trial court’s equitable division of the marital assets.

Luttrell v. Luttrell (Tennessee Court of Appeals, Western Section, January 28, 2014).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce, Matrimonial and Family Law Attorney.


Responses

  1. I don’t like that result. Separate property is just that so why is wife being penalized for having it?


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